# L3 - Within and beyond the Solow model • Chapters 4-5...

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Unformatted text preview: Within and beyond the Solow model • Chapters 4-5, book 1 • Within the Solow model – Comparing levels and growth rates of k and y under different s , A , L , and n – A side point: The Malthus model – The Solow model with technological progress – The model prediction and data: absolute and conditional convergence • Beyond the Solow model – Long run growth without technological progress: AK model – Long run growth with endogenous technological progress 1 The Solow model: Comparing s,A,n,L An important equation: k * = ( sA n + δ ) 1 1- β ( (1 + n ) k t +1 = (1- δ ) k t + sAk β t so (1 + n ) k * = (1- δ ) k * + sA ( k * ) β so ( n + δ ) k * = sA ( k * ) β and so ( k * ) 1- β = sA n + δ .) 2 Two economies: s 1 < s 2 , same k and else. • Outside steady states, economy 2 has higher growth rates of k and y . • Once both economies are in their own steady states, they have the same growth rates, but economy 2 has higher k and y . Two economies: A 1 < A 2 , same k and else. • Outside steady states, economy 2 has higher growth rates of k and y . • Once both economies are in their own steady states, they have the same growth rates, but economy 2 has higher k and y . 3 Two economies: L 1 < L 2 , same K and else....
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L3 - Within and beyond the Solow model • Chapters 4-5...

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